HONG KONG PROPERTY MARKET ABOUT TO CRASH – Bubble About To Burst?

It was in February of 2016 when, looking at the latest trends in the Hong Kong housing market, we wrote that in January [2016] Hong Kong home prices tumbled the most since July 2013, and after a 12 year upcycle, prices were now down 10% from the recent peak just four months prior… while the local Centaline Property Agency estimated that total Hong Kong property transactions at the start of 2016 were on track to register the worst month on record.

Fast forward to today when that particular blip is long forgotten, swept away by the record credit injection unleashed by China in the interim, which has spilled over into the Hong Kong’s housing market where instead of concerns about a bubble bursting, the locals are preoccupied with chasing the latest, and biggest yet, housing bubble to form in Hong Kong, as crowds of people line up in hope of being the winning bidder for one of several properties for sales, some of which are oversubscribed as much as 15x. According to the latest data from Hong Kong’s Centaline Property Centa-City Leading Index of existing homes, prices have risen an unprecedented 23% in the past year, setting new price records week after week. Over the past decade, home prices in the financial capital of Asia have tripled. snaking queues of thousands of prospective apartment buyers in Hong Kong signaled authorities have made no progress in cooling a red-hot property market, where prices are at records.

At the Victoria Skye, a luxury project at the former airport site of Kai Tak and at the Ocean Pride development by Cheung Kong Property Holdings people were lining up on Friday and over the weekend for their chance to buy a home at all time high prices.

K&K Property has offered an additional 200 units at Victoria Skye after it sold 306 flats on Saturday, Ming Pao newspaper reported. Cheung Kong will put another 346 up for grabs after selling 496 in a single day, May 26, it said. In both cases, the developers will raise the prices of the additional units by about 2 percent, the newspaper reported. hong kong economic times

It is also obvious to the local central bank, which, however, like Vancouver and Toronto, appears powerless to halt the of hot mainland money. The Hong Kong Monetary Authority has been tightening rules for lenders, Bloomberg writes, including restricting levels of lending to developers, as it tries to limit financial risks and take some of the heat out of the market.

And yet, so far the result is absolutely nothing as nobody bothers to listen to the growing warnings.

Speaking at a Legislative Council meeting last Monday, Hong Kong’s central bank chief, HKMA Chief Executive Norman Chan, said levels of demand were reminiscent of 20 years ago, just before Hong Kong suffered a property bust, and he expressed concern that people with limited financial resources were buying just because they thought prices would only keep going up, just like in a bubble.

Chan said that while the global economy has improved, uncertainties remain and warned that when the property cycle reverses, “the impact will be serious.”

I ask the question because, as the chart shows, one thing is different from both 1981 and 1997. It is that the underlying cost of money, as best represented by the US 10-year treasury yield, has come steadily down since 1981 and still defies expectations that it will soon rise again. How it happened is a simple story. Our interest rates are tied to US rates through our peg to the “hong kong” property “home owner” flat apartment “hong kong property” “hong kong apartment” home mortgage “property prices” investment buyer “home buyer” asia “asia property investment” loan “home loan” rent “hong kong rent” rental market markets price “market crash” “property bubble” crash invest “invest overseas” life living lifestyle banking currency forex “forex trading” income job “mortgage rates” bank savings “savings account” couple family marriage US dollar and it so happened that in 1987 control of the US Federal Reserve board fell into the hands of a private statistics consultant with political ambitions, Alan Greenspan. gold silver bitcoin

[Former Federal Reserve chairman Alan Greenspan kept his job by frequently reducing interest rates to prop up financial markets. He engineered a policy of reducing interest rates every time there was a scare in financial markets, thus ensuring both that these markets quickly rose again and that he retained his job through several presidential administrations.

The result has been severe inflation in financial markets, growing wealth disparity around the world and economic growth suppressed through skewed allocation of capital.

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